For the vast majority of consumers, a bank account is one of the fundamental tools of financial security. According to 2020 Federal Reserve data, 5% of U.S. households are unbanked or unbanked.
Non-U.S. citizens face many serious difficulties in managing their finances, including how to keep their funds safe and avoid high fees for check-cashing services.
“Without a bank account, new Americans won’t be able to access funds, pay the cost of a cash check, and miss out on the many conveniences of a checking or savings account,” said Rebecca Morris Hoeft, chief brand officer at Sunrise Banks in St. Paul, Minnesota.
The good news for non-U.S. residents is that they can open a checking or savings account to avoid some of these high fees, and they also have the security of the FDIC. Opening an account requires more errands and paperwork than a US resident, but for the financial benefit, it’s well worth it.
In order to open an account, the bank or credit union needs to know it’s you. It is part of the U.S. government’s Customer Identification Program, which sets the standard for how financial institutions should confirm customer identities.
Verifying your identity varies by bank or credit union, but typically includes the following:
- Photo ID: Documents that can prove your name and date of birth are an unexpired passport, alien registration card, and foreign driver’s license.
- Electricity bill: Electricity or gas bills with your current address will suffice.
- Initial Deposit: Not all banks or credit unions require an initial deposit, but many do. For example, Wells Fargo requires a minimum deposit of $25 to open a daily checking account.
- Individual Tax Number: Many bank accounts pay interest, which is taxable income. Banks require non-resident ITINs to provide information to the IRS for tax purposes.
Many consumers are used to completing many tasks online, including opening a bank account, but non-U.S. citizens may find this impossible.
“Due to the nature of the identity issue, the online account opening system doesn’t work for people who don’t have (Social Security numbers),” Hoeft said.
Alternative identification options
For non-residents or non-citizens without a social security number, there are other options, including a passport number and country of issuance, an alien identification number, or the number and country of issuance of another unexpired government-issued document showing nationality / area or residence with photo.
Non-US citizens can apply for an ITIN, which is one of the most commonly used alternative forms of identification. An ITIN can be obtained by filing a petition with the IRS. Non-citizens can use one of these numbers to file their taxes. ITINs do not authorize anyone to work in the United States and are used for tax reporting purposes only. To obtain an ITIN, a Form W-7 must be completed.
Submit a completed Form W-7 along with proof of identification and alien status documents to the IRS:
- Inland Revenue Department
- Austin Service Center
- ITIN operations
- PO Box 149342
- Austin, TX 78714-9342
If you don’t want to mail the form, you can take the form to an IRS-authorized certification recipient.
The IRS issues an ITIN by mail, but it’s not a quick process. Approval usually takes about seven weeks or more.
The benefits of opening a bank account
Filling out forms, going to a broker’s office, and waiting nearly two months may sound like a hassle, but the benefits of a bank account outweigh the hassles.
Some of the ways bank accounts help consumers manage their money are:
- Lower Fees: If you don’t have a checking account, checks must be cashed through a check-cashing service or a prepaid debit card, which often have high fees.
- Added protection: Putting money in a bank account is much safer than putting it in a drawer. Banks and credit unions offer deposit insurance up to $250,000.
- Save for the future: With savings accounts, consumers can develop good habits to build wealth over the long term and prepare for emergencies. Savings accounts typically only allow six withdrawals per month.
- Build credit opportunities: Building a strong banking history can be a gateway to larger life goals, such as buying a car or owning a home. Some banks are on a mission to help non-US citizens get housing. In addition to helping non-U.S. citizens open checking and savings accounts, Hoeft said Sunrise is “one of the few banks in the country that uses their ITIN to provide home mortgages to new Americans without a Social Security number.”
Banks and credit unions that accept alternative IDs
At first glance, many banking websites seem to indicate that none of them accept alternative IDs. While many of the largest banks list a Social Security number as a requirement on their websites, it may only be necessary to open an account online.
In some cases, the bank will help if you are missing information. Appointments can be made with many major banks that accept online ITINs in lieu of Social Security numbers, including:
- Bank of America Online Appointment
- PNC Bank – Online Appointment
- Chase – Online Appointment
- Citibank – Online Appointment
Some credit unions also accept alternate IDs. For example, DC Credit Union in Washington offers SAFE checking accounts exclusively for non-U.S. citizens. Since the account does not bear interest, there is no need for a tax ID, just a foreign ID.
Another option non-U.S. citizens should consider is a bank account, part of the banking industry’s efforts to welcome unbanked customers. In addition to low fees and no overdraft fees, the Bank On standard recommends that planned banks and credit unions accept alternate IDs.
However, accepting an ITIN or foreign ID to open an account is not the only issue that matters to non-US citizens. It’s also important to compare the fees and minimum balance requirements associated with these accounts. Read Bankrate’s guide to avoiding bank fees to avoid overpaying for storing and managing cash.
The banking industry’s traditional identification requirements seem to be a stumbling block for non-US citizens trying to open a bank account, but many banks and credit unions accept other forms of identification to make it easier. While getting an ITIN requires some extra work, being able to open checking and savings accounts—and in some cases, take out a home loan—can make a big difference in achieving financial security.